UPM and Sappi announce graphic paper merger to tackle industrial hurdles
Key takeaways
- UPM and Sappi plan to establish a joint venture, aiming to generate about €100 million (US$116.5 million) in annual synergies.
- The move is designed to address structural industry challenges, including declining demand, overcapacity, and high energy costs.
- The joint venture follows modernization and capacity investments by Sappi, including upgrades at its Gratkorn Mill in Austria and an expansion at its Somerset Mill in the US.
(Image credit: UPM).UPM-Kymmene (UPM) and Sappi have signed a non-binding letter of intent to create a joint venture combining their regional graphic paper operations. The planned consolidation is expected to generate roughly €100 million (US$116.5 million) in annual synergies.
The venture will combine UPM’s entire Communication Papers division with Sappi’s European graphic paper business under an independent company. The transaction aims to support a more efficient and adaptable graphic paper business.
Massimo Reynaudo, president and CEO at UPM, says: “The proposed joint venture represents a decisive response to the structural changes in the European graphic paper industry. It would offer a path to strengthen the resilience of the industry and provide long-term commitment and supply security to graphic paper customers.”
“UPM Communication Papers has reliably delivered value to customers as well as UPM shareholders. It has been the foundation upon which UPM has expanded its broad portfolio of sustainable material solutions. The planned joint venture would provide the best future for the UPM Communication Papers business, focus UPM’s portfolio, and strengthen our balance sheet.”
Addressing industry challenges
The companies share that the strategic reallocation of production volumes to “the most efficient paper machines” enables the joint venture to achieve more sustainable capacity utilization and deliver stronger operational performance.
The joint venture aims to rationalize supply in an industry facing declining demand, structural overcapacity, and high energy costs, according to the companies. “It would contribute to a more balanced and resilient European market, and make the industry better positioned to withstand market challenges and increasing imports to Europe.”
Last year, Sappi Europe completed phase two of its modernization project at Gratkorn Mill, Austria. The investment aimed to increase production sustainability for the Magno paper range.
Earlier this year, Sappi completed the US$500 million conversion and expansion of its Paper Machine No. 2 at its Somerset Mill in Maine, US. The company invested in the machine as the demand for paper-based packaging continued to rise.
